Home boom 'main risk to recovery'

With approvals for large mortgages on the increase, Mr Carney expressed concern about the dangers of another "big debt overhang" building up.

In an interview with Sky News's Murnaghan, to be shown tomorrow, he said the Bank was monitoring the situation closely.

But he said there was little they could do about the "deep, deep structural problems" in the housing market, with demand for homes outstripping supply.

Mr Carney surprised some analysts last week when he played down the prospects of an early rise in interest rates - despite the fears of a housing market bubble.

In his interview - according to advance extracts released ahead of the programme - he said the Bank of England was watching to ensure the banks had enough capital to withstand the risks involved.

They were also checking lending procedures to try to ensure that mortgages were only issued to people who could afford them.

"By reinforcing both of those we can reduce the risk that come from a housing market that has deep, deep structural problems," he said.

Nevertheless, he said that there was evidence that large value mortgages - with loans of more than four times a borrower's salary - were on the rise again, with the risk that they could destabilise the economy.

Promoted stories

"The biggest risk to financial stability, and therefore to the durability of the expansion - those risks centre in the housing market and that's why we are focused on that," he said.

"We don't want to build up another big debt overhang that is going to hurt individuals and is very much going to slow the economy in the medium term.

"We would be concerned if there were a rapid increase in high loan to value mortgages across the banks ... we've seen that creeping up and it's something we're watching closely.

Ultimately, he said, the real problem lay in the shortage of homes - with the UK building half the number of new homes that were being built in his native Canada, despite a much bigger population.

"The issues around the housing market in the UK...is there are not sufficient houses built in the UK," he said.

"(There are) half as many people in Canada as in the UK, (but) twice as many houses are built in Canada every year than in UK."

Housing Minister Kris Hopkins said: "In 2010 we inherited a broken housing market, but our efforts to fix it are working. We've scrapped the failed top-down planning system, built over 170,000 affordable homes, and released more surplus brownfield sites for new housing.

Share article

"We've also helped homebuyers get on the housing ladder, because if people can buy homes, builders will build them.

"Housebuilding is now at its highest level since 2007 and climbing. Last year councils gave permission for almost 200,000 new homes under the locally-led planning system, and more than 1,000 communities have swiftly taken up neighbourhood planning. It's clear evidence the Government's long-term economic plan is working."

Promoted Stories

Comments (3)

With the Govenor of the Bank of England wading in with comments about the booming housing market being such a risk, you can bet it won't be long until the latest property bubble bursts. Here we go again..

With the Govenor of the Bank of England wading in with comments about the booming housing market being such a risk, you can bet it won't be long until the latest property bubble bursts. Here we go again..heartbeat

With the Govenor of the Bank of England wading in with comments about the booming housing market being such a risk, you can bet it won't be long until the latest property bubble bursts. Here we go again..

Score: 4

ivegate says...12:47am Sun 18 May 14

Key words "with approval for LARGE mortgages on the increase"

Key words "with approval for LARGE mortgages on the increase"ivegate

Key words "with approval for LARGE mortgages on the increase"

Score: 4

heartbeat says...4:21pm Sun 18 May 14

Prices are so far out of line with wages, even in grotty areas. By coming out and voicing the fears he is making it happen. I fear there is going to be an almighty fall-out some time soon with a return to mass repossessions and people in serious debt. Yet another boom and bust cycle, so depressing!

Prices are so far out of line with wages, even in grotty areas. By coming out and voicing the fears he is making it happen. I fear there is going to be an almighty fall-out some time soon with a return to mass repossessions and people in serious debt. Yet another boom and bust cycle, so depressing!heartbeat

Prices are so far out of line with wages, even in grotty areas. By coming out and voicing the fears he is making it happen. I fear there is going to be an almighty fall-out some time soon with a return to mass repossessions and people in serious debt. Yet another boom and bust cycle, so depressing!

Score: 1

Sorry, an error occurred.

Post a comment

Remember you are personally responsible for what you post on this site and must abide by our site terms. Do not post anything that is false, abusive or malicious. If you wish to complain, please use the 'report this post' link.

Ipsoregulated

This website and associated newspapers adhere to the Independent Press Standardards Organisations's Editors' Code of Practice. If you have a compaint about editorial content which relates to inaccuracy or intrusion, then please contact the editor here. If you are dissatisfied with the response provided you can contact IPSO here